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Hero looks to rescue IBDs

Editor's note: The following article appears in the April 1 issue of Bicycle Retailer & Industry News.

By Steve Frothingham

LONGMONT, CO—One of the largest bike manufacturers in the world, India’s Hero Cycles, is looking to start small in the U.S. market.

Former Schwinn president Kevin Lamar is heading up U.S. operations for the Indian giant, which produces 19,000 bikes a day at its Ludhiana factory and dominates the Indian and African bike market.

The company has supplied Wal-Mart stores in India for years and recently cut a deal to supply the retailer’s U.S. stores with bikes, likely to be marketed under a Wal-Mart house brand.

Meanwhile, Lamar wants to supply American IBDs with Hero-branded juvenile and youth bikes that he said will allow shops to compete on price with mass merchants.

Lamar said many specialty retailers have ceded the low-end kids’ bike market to the mass merchants because most IBD suppliers can’t come near matching their prices. The result is that specialty shops have lost an opportunity to become cradle-to-grave sellers to families, he said.

Lamar has set up shop in Longmont, Colorado, just north of Boulder. Longmont also served as headquarters for Schwinn when Lamar ran the company in the 1990s. Besides Lamar, Hero now has three employees in Longmont. “We are starting small,” Lamar said. “We are likely to be a niche supplier for a while, while we perfect our craft.”

Lamar said he hopes to start delivering Hero bikes to U.S. dealers by this summer, starting with a handful of stores whose owners he has known since his Schwinn days.

Colorado offers a central shipping hub so that Hero will be able to cheaply provide just-in-time shipment to dealers nationwide. He said he’s hoping to help improve dealer profitability by reducing their inventory levels.

To date, Indian bike manufacturers have had little impact outside their own country, Africa and Indonesia. Though the country is capable of pumping out thousands of bikes for those markets, it lacks the bike industry infrastructure of China and Taiwan. Most notably, Indian factories would have to import Shimano parts and pay a duty on them, making it hard for Indian brands to compete with China and Taiwan on price on IBD-quality adult bikes.

Still, industry consultant Jay Townley believes Hero’s move into the U.S. is significant. America’s largest retailer sourcing bikes from a country that has been a non-starter and virtually unknown to the bulk of the industry could signal the start of an eventual shift in production.

“This is potentially a sea change in the U.S. bicycle market from the supply side,” Townley said. “It opens the door to carbon fiber bikes in India. China’s evolving and it may be that China, like Japan and Taiwan, will not be attractive from the standpoint of the low-end bikes. Maybe in the U.S., the shift is to locally made bikes. There’s a huge dynamic going on here and this is just a capper to it.”

Though U.S. brands have sourced low-end Indian-made components from time to time, no company has ever operated frame factories there.

“This is the first time there’s been a major move of India coming to the floor as a major supplier” and represents a statement from Wal-Mart that the mass retailer wants to stay in the bike business, Townley said.

Indian-made bikes are subject to the same U.S. import tariff as Chinese bikes: 3 percent for youth bikes and 11 percent for 26-inch and 700c bikes.

The Ludhiana factory can easily supply juvenile and youth bikes where customers do not require Shimano parts, Lamar said.

“I have never seen a factory so vertically aligned,” he said. “They make spokes, spoke nipples, seats—everything. The only thing they bring in is tires.”

Hero claims its bicycle factory is the first in India to have mastered just-in-time manufacturing, a practice that began in Japan and is common at many Taiwanese and Chinese factories.

Except for some low-value aluminum, Hero makes almost all its bikes from steel, but Lamar said company owners are very interested in moving into higher-value aluminum and carbon fiber manufacturing.

Lamar said he felt comfortable with Hero in part because it’s a family-owned company with a long history, much like Schwinn was when he joined that company in Chicago in 1989.

Lamar was president of Schwinn/GT Bicycle from 1998 to 2000 and then was with Nautilus for four years and Lamar Fitness for three years. Most recently he was vice president and general manager of the consumer products division of Star Trac Health and Fitness.